After five years of the biggest housing boom in history, sales and prices are starting to moderate, portending a further slowdown in the once-invincible US economy.
From St. Louis to San Francisco, the bidding wars and almost-instantaneous sales that had come to characterize the prosperity of the 1990s are diminishing. In some places, homes are staying on the block two to three times longer than they would have a year ago, and prices of high-end homes are easing or even falling.
Without question, the market is still strong. Housing prices are generally rising and demand remains high. Sales of new homes, in fact, jumped in December, the government reported yesterday. Though the 13.4 percent rise was unexpected, analysts say the overall pace of the market is still easing - as is evident by Anne Felix's sales.
In a normal January, the real estate agent's office in Weston, Mass., will sell about eight homes. Yesterday, it sold its first - and last - of the month.
It's a refrain heard increasingly across the country. And despite optimism over the expected drop in interest rates by the Federal Reserve yesterday, the ebbing of the economy may mean that the housing market has peaked.
"We're starting to see a downward trend in sales," says Kory Bockman, an economist at the National Association of Realtors in Washington. "The economy as a whole is causing some people to hesitate in buying a house."
The impact has been widespread, if uneven, as befits a transition in the economy. While sales of new homes were rising in December, for instance, sales of existing dwellings fell by 7.4 percent. Moreover, the Housing Market Index, a forecast by the National Association of Home Builders, is at its lowest level in four years.
New 2000 data also show that home sales fell from 1999 levels in many cities nationwide, including San Diego, New Orleans, and Kansas City, Mo. For some, it was the first decline in five years.
Where the prices are falling
Almost no area of America has been unaffected. But different interrelated factors have influenced each region individually.
While the decline in the dotcom industry has led to skittishness in high-tech hubs like Seattle, San Francisco, and Boston, an emerging recession in manufacturing has hampered home sales in the Midwest. In New York and the mid-Atlantic, the instability of the stock market has led to greater caution among buyers.
Dick Johnson is seeing these forces at work in San Francisco.
"The market is still active, but it's not as frenzied as it has been," says Mr. Johnson, an agent for Fred Sands City Properties.
Specifically, he notes, properties that would have generated 15 to 20 bids a year ago are now getting only three or four. And the extreme high end of the market - with homes that sell at $3 million or more - has slowed down.
A country away on the other coast, the story is the same. In Manhattan, high-end homes are staying on the market longer, and buyers aren't overbidding as aggressively as they once did, says Barbara Corcoran of The Corcoran Group, a New York realty.
On Monday, her company sold a three-bedroom condominium on Park Avenue for $3.1 million. The asking price was $3 million. "What surprised all of us was that it wasn't bid higher," says Ms. Corcoran. "There's a mood change in the market for sure."
Although such homes might represent only the smallest fraction of the housing market, their dropping sales are indicators of the sobering national mood. The fact that fewer insta-rich millionaires are prospecting for houses like '49ers points to the changes at every level of the housing market, experts say.
In fact, some of the hardest hit areas might be far from the madding crowds of megacities like New York and Los Angeles. It's the mid-size metropolises that have the toughest time avoiding a serious downturn.
"These are areas that feel the slowdown more than others, because their economies aren't as diversified," says Mr. Bockman. "They drop out of the positive party before the others do."
Akron, Ohio, for one, is already beginning to feel the pinch. When things are going well, Shannon Carneal will go for weeks without getting a call from a carpenter. But now, the co-owner of Akron Building says he's getting three or four calls a week from handymen looking for work.
"When my phone starts ringing from the carpenters at the union hall, that's an indication to me that business is slowing," he says.
For many other contractors and real-estate agents, though, business prospects remain good, and the idea that a downturn could be coming seems remote. To them, the market is just calming down, and there's no reason that it shouldn't be healthy in the long term.
"We've seen before where the market shrugs and goes back up," says John Karevoll, an analyst for Data Quick, a real-estate research firm in La Jolla, Calif. "We don't know if this leveling off is the beginning of a trend or just a temporary thing."
Let's not panic here
Even those who have seen a drop in sales are not pessimistic. Interest-rate cuts have boosted demand in recent weeks, and mortgages are now easier to get than at perhaps any time in history.
Still, as America heads into the economic unknown, there is a sense of unease.
"The market is very unsure of itself," says Ms. Felix of the Hunneman Coldwell Banker office in Weston. "Some people have taken a step back and are waiting to see what happens."
Rebecca Myers in New York and Tricia Cowen in St. Louis contributed to this report.
(c) Copyright 2001. The Christian Science Publishing Society